The nine US states trying to squeeze tougher anti-trust punishment for computer giant Microsoft have unexpectedly cancelled what was to have been a demonstration of a central demand of their case.

Any relief at Microsoft's Redmond base will be tempered, though, by reports that Europe is expected to extract much harsher penalties for the company's transgressions than are likely in the US.

The states have been trying to persuade the judge empowered to decide on Microsoft's fate that the company could produce a modular version of its Windows operating system, without the web and media software it has chosen to bundle in recent years.

But now they have ditched a planned demo by computer consultant James Bach, which purported to show that it could be done.

Their claim is that since Microsoft has failed to back up its assertion that it is impossible to slim down Windows without destroying it, there is no need to demonstrate it themselves.

The judge had criticised them for bringing in the evidence at the last minute, and Microsoft had demanded an indefinite period to study it.

European threat

The decision comes as more trouble looms on the eastern horizon for Microsoft in the shape of Europe's own anti-trust investigation.

Indications coming out of Brussels are that Maroi Monti, the European competition commissioner, intends to be a great deal tougher on the company that the US Justice Department has proved to be.

According to the Financial Times newspaper, Mr Monti's three-year investigation is likely to demand a stripped-down version.

It will also, the paper says, force the company to disclose much more information about Windows than it wants to, to make sure it does not abuse its position to try to dominate the market for high-end server computers.

Not only would such a decision incense Microsoft; it would also increase tensions between European and US competition officials stirred up by the EU's veto on plans for a $34bn merger between GE and Honeywell last year.

Caught in the act?

Back in the US, a central element of the EU's investigation was in focus.

The EU is unhappy with Microsoft's Media Player software, which it fears the company wants to use to dominate the burgeoning market for online media.

Evidence to support that fear arose during the court case in Washington DC, when a Microsoft official admitted that the company forced users to access music and video through Media Player even when they had chosen to use another company's software.

This is a central complaint of Apple Computer and RealNetworks, both of whom offer competing software and standards.

"The reason (Media Player) is not replaceable is that Microsoft does not allow it to be replaceable, correct?" asked John Schmidtlein, a lawyer for the nine states.